from the the-industry's-'get-broke-quick'-scheme dept

We've covered a number of stories dealing with ebooks and their disruption of normal publishing. There have been a lot of growing pains in the industry as the ebook market continues to expand, replacing physical sales (and their associated margins and intentional bottlenecks) and knocking down a healthy number of barriers to entry.

Allegations of ebook price fixing are still in the air, pending the Department of Justice's investigation. No matter the final decision, publishers will still be free to set ebook prices as high or low as they want to. But if they insist on pricing themselves out of the market, they'll be seeing an increasing number of their authors decide to write their own tickets, as others have done with great success.

Mark Coker, founder of Smashwords, breaks down exactly how traditional publishing houses are shooting their own authors in the foot with pricing "strategies" that run in direct opposition to how people purchase ebooks. With ebooks expected to compose nearly 30% of trade book sales (in total dollars) in 2012, authors may be doing serious damage to their careers by selling their ebooks through traditional publishers.

One surprise, however, was that we found $2.99 books, on average, netted the authors more earnings (profit per unit, multiplied by units sold) than books priced at $6.99 and above. When we look at the $2.99 price point compared to $9.99, $2.99 earns the author slightly more, yet gains the author about four times as many readers. $2.99 ebooks earned the authors six times as many readers than books priced over $10.

If an author can earn the same or greater income selling lower cost books, yet reach significantly more readers, then, drum roll please, it means the authors who are selling higher priced books through traditional publishers are at an extreme disadvantage to indie authors in terms of long term platform building. The lower-priced books are building author brand faster. Never mind that an indie author earns more per $2.99 unit sold ($1.80-$2.10) than a traditionally published author earns at $9.99 ($1.25-$1.75).

This isn't news to anyone following along here at Techdirt. For some reason, though, many traditional publishers still feel that higher prices equal higher profits and fail to see that lowering prices will increase their sales and profits over and above what they can expect at their normal price points.

Certain members of the traditional publishing crowd argue that lower prices are unsustainable given built-in costs and that pursuing these price points will somehow "devalue" the written word. First of all, selling your product for more than the public is willing to pay is what's actually "unsustainable." And any explanations involving fixed costs will fall on deaf ears because consumers don't make purchases based on what they think the product is worth to the company selling it. They purchase based on what they feel the product is worth to them.

Secondly, if people aren't buying at $9.99 but they are at $2.99, then the product isn't "devalued." If you're selling many more units at a lower price, then your price point is closer to "dead on" than "undervalued."

The picture painted augurs well for indie ebook authors, but indicates that authors who continue to publish with traditional publishers might actually be damaging their careers. Look no further than the bestseller lists at Apple, Amazon or Barnes & Noble to see that indie ebook authors are taking eyeballs from the authors of NY publishers. As I write this, seven of the top 30 bestsellers in the Apple iBookstore are distributed there by Smashwords.

In the short term, existing publishers would do well to follow Coker's advice and start maximizing sales by lowering prices. Most publishing houses have already had the term "price fixing" pointed at them, and thinking that you can somehow outlast the consumers in a price war is just going to shove you to non-existence that much faster. Exclusive deals with authors won't mean much when no one's buying, and those authors are going to swiftly tire of minimal sales and miniscule royalties, especially when they can plainly see better opportunities outside the gates.

from the success-stories dept

We've written a lot about the incredible new ecosystem of independent, self-published ebooks, which in a few short years (with the help of huge success stories like Amanda Hocking and Joe Konrath) has largely eliminated the stigma of what we once called "vanity publishing", to the point that even traditionally published authors are deciding to go it alone.

Kindle Direct Publishing has quickly taken on astonishing scale – more than a thousand KDP authors now each sell more than a thousand copies a month, some have already reached hundreds of thousands of sales, and two have already joined the Kindle Million Club.

Under the old system, many of these authors would likely still be sending out manuscripts, hoping for the lucky convergence of circumstances that puts it in the right pile in front of the right reader when they're in the right mood. There's still some disdain for self-publishing in some circles—but with the open playing field that has been created, the increasing number of authors flocking to it, and a growing roster of success stories, it won't be long before that too starts to change.

from the the-more-things-change,-the-more-they-wish-things-wouldn't dept

[UPDATE: Some comments (namely Steve Mosby's and David Hewson's) have pointed out that there is more to this story than simply the post by Stephen Leather I used as the basis for this one. While other accounts of this event differ slightly, the overview remains pretty much the same. However, there is a glaring omission from Leather's post that is mentioned in others. David Hewson's take on the event, as well as Mosby's, mention that Leather admitted to using sock puppets to comment in forums to drum up business for himself. This, in and of itself, would be unpleasant enough. But there appears to be evidence that Leather's sock puppetry goes beyond simple PR and into harassment of other writers, including writing one-star reviews on Amazon and setting up Twitter accounts in their names in order to, for lack of a better term, screw with them. This obviously goes far beyond shady PR tactics.

While I believe that the points raised by Stephen Leather's post, as presented on his blog, are still valid, these other issues call Leather's character into question. I based this post solely on Leather's take which, in retrospect, was unwise. This gives the appearance that I (along with Techdirt) approve of these other actions or have simply chosen to disregard them. This is not the case. I was unaware of these aspects until they were raised in the comments, and that is no one's fault by my own.

I would encourage you to read the other postings to more fully round out this picture of Stephen Leather. Again, I feel the points he raised were valid but I do not want to give the impression of implicit approval of his other actions.]

There's something about disruption that stirs up a certain amount of animosity in those on the receiving end. It sometime seems to be almost a "fight-or-flight" response, brought on by those whose "sure thing" has become about as fiscally wise as "buying a home" or "selling the farm to buy Facebook shares."

The "fun" began when Leather, at the behest of another author, appeared on a panel whose very name stacked the deck against him: "Wanted for Murder: the e-book." As pretty much the sole representative of e-publishing, Leather was outnumbered four-to-one, joining a publisher, another writer (with few e-book sales), an agent and a bookseller. Even with this huge advantage, the old guard couldn't keep itself from deploying mockery, ignorance and condescension when addressing Leather's comments.

What surprised me was how the audience seemed so set against cheap eBooks. Rather than taking my view that books are best sold at a price that readers find attractive, the general feeling of the audience seemed to be that books were already – as one man said – ‘cheap as chips’ while Norwegians had to pay £40 for one of Jo Nesbo’s books. When I explained that I had sold half a million eBooks last year, most of them for less than a quid, I was surprised to hear a few boos and hisses rather than the applause that I had expected.

Can you feel the hate? This doesn't sound like authors supporting other authors. This sounds like the tortured noises of a large animal backed into a corner by a previously unrecognized aggressor. I's now up against the wall, in an unfamiliar position, and unsure of what move to make next.

It gets simultaneously uglier and stupider from there:

The most surreal moment for me came when the President of the Publisher’s Association, Ursula Mackenzie, was trying to defend their policy of maintaining eBooks at a high price. Basically she was saying that books needed to maintain their value and that 20p and free eBooks needed to be stamped on.

I understand her view, but I’m a big fan of selling eBooks at lower prices providing you can get high volumes of sales. And I’m happy enough to give books away if it helps to bring in new readers.

The old argument about "devaluation" is now in play. No matter how many times it's stated, it's still nothing more than a willful misreading of the situation. Unknown (or unsigned) writers selling cheap e-books doesn't devalue your product. Innovations and the removal of barriers lower the costs associated with your product, especially in regards to the digital version. Publishers seem to think that consumers should pay physical prices for digital items. It's not a matter of "devaluing" anything. It's a matter of publishers overvaluing their goods in order to preserve the margins they're accustomed to.

When faced with this fact, publishers and certain authors start throwing out statements concerning the costs of editing and marketing books as the reason why their e-book prices are unable to square with reality. Publishers also use these same statements to explain why they're "entitled" to the largest cut of the proceeds. Leather had his own thoughts on this, but no one's interested:

Mark turned to the conversation around to the cost of books and how much went to the publisher, and asked Ursula to justify why the publisher’s took the lion’s share. She put forward the old arguments about editing and marketing and I tried to explain that with eBooks, an author with a large fan base can use fans to edit and proof-read. Everyone seemed to think that meant I thought writers could do away with editors, and of course that’s not the case. But not every writer needs a hard edit, some writers need little more than proof-reading and fact-checking and that can be done through fans. And my Jack Nightingale series is edited by a full-time editor on my agent's staff so those books need very little editing by my publisher. Yes, I know that some authors need a lot of editing. But I don't.

No one claims that Author A's strategy in the e-book game will work for Author B, but the publishers seem to think that their strategies and methods will work for all authors and that these associated costs will always exist (at increasing price points), hence the "need" for higher prices.

Leather also discussed piracy in a reasonable fashion, stating that he felt pirates "helped market his books." This was greeted by negativity ("...I thought I was about to be lynched...") and name-calling. Pointing out that DRM doesn't work and negatively affects paying customers was greeted with complete denial by the publisher's representative. When Leather questioned why a writer who sells most of their books through Amazon (not exactly known for leaving much on the negotiating table) would need an agent, agents in attendance began firing off "nasty tweets" about him.

But there's one moment in Leather's post that stands out from all the rest of the petty defensiveness of the panel, and gives an indication that some very fundamental misunderstandings of economics, consumer behavior and basic math might be what's holding back certain publishers and authors from seeing how Leather's strategy might work for them.

So I explain to Ursula – and the audience – that I can write a short story in five days and am happy to sell that at the Amazon minimum of 72p which generates me an income of 25p. At this point Ursula – who runs one of the biggest publishing houses in the UK – asked me “so you’re happy to work for 5p a day, are you?” The audience laughed and clapped, and I was frankly gob-smacked. I couldn’t understand why they hadn’t seen the fallacy in her comment. She was assuming that I spent five days writing a story and then sold one copy. She can’t possibly have believed that, could she?

She might. Many publishers and authors might. So many of them seemed completely focused on making the largest profit they can from the fewest possible sales. It seems like a good idea, but, as has been shown here before, lowering your prices can increase both sales and your net income. Keeping your prices artificially high in hopes of earning more per sale can cost you more in the long run. Leather isn't selling one copy at 5p. He's selling thousands.

Of course I don’t work for 5p a day. My Inspector Zhang stories sell about five or six hundred copies a month. Each. So one story sells 6,000 copies a year. So over the next ten years it could sell 60,000 copies which means I’d get £15,000, which is £3,000 a day and that’s probably more than she gets paid.

It doesn't get much more condescending than that. Assuming that 72p purchases will never add up to "real" money is keeping a lot of publishers and authors from making as much as they could. There's a hint of snobbishness to that line of thought: that somehow self-publishers who sell at low prices are lesser artists and should be mocked, pitied or ignored.

So be it. When the walls come crashing down around you, I'm sure the gate you've spent so much time maintaining will make all the difference in the world. And while you're admiring the distance between you and these upstart outsiders, these upstart outsiders will be more than happy to be mocked and pitied all the way to the bank.

from the boom dept

We recently wrote about Paulo Coelho convincing his publisher, Harper Collins, to run an experiment, in which they offered up nearly all of his ebooks for just $0.99 (the one exception being his most famous book, The Alchemist). In the comments, we had an interesting discussion, in which someone suggested that even dropping the price by 90% would mean it was unlikely that he got 10x more sales to make up the difference. Others pointed to similar experiments -- such as those by Valve, in which dropping prices by large amounts increased sales by much, much larger percentages.

Paulo himself contacted us to share some of the initial results -- pointing out that, according to Amazon, the sales of a bunch of his books increased between about 4,000% and 6,500%. Yes, that's multi-thousands of percent increases. I would think that more than made up for the difference in price...

While the screenshot just shows the top books, he noted that a similar pattern was seen on basically all of his books.

One hopes that this will send book publishers running to their nearest economics text or professor, so that they can be taught about price elasticity, and why lowering prices can often make you more money.

from the wow dept

One thing that we've seen even among authors who totally "get" that ebook pricing is out of control, is that if they have deals with traditional publishers, those publishers are never interested in offering low ebook prices, even if there's growing evidence on the elasticity of ebooks, showing that the maximizing price is often less than $5. Joe Konrath's experiments showed that lowering your price significantly can create a huge uptick in net revenue. But the big publishing houses always talk about overhead and the costs of publishing a book... even to the point of claiming that $10 is too cheap.

That's meant that authors like Paulo Coelho, one of the best selling authors of all time, had to pirate his own book, by posting it online and pretending to be someone else. Even after releasing such works for free was shown to increase sales, his publisher resisted supporting these efforts.

However, perhaps the times are changing. Somehow, Coelho has convinced the US publisher of his first 11 books, Harper Collins (his most recent book came out with a different publisher) to offer ebook versions of 10 of his 11 books with them for $0.99. Now, this only applies to US and Canada (and right now it's only the Kindle, though other platforms should be supported soon). It also appears this is a limited time offering. Also, perhaps most importantly, Harper Collins chose not to include Coelho's most famous book of all, The Alchemist. So it's not a complete recognition of the way things are heading, but it is impressive. While Coelho is on the record repeatedly telling people to download unauthorized copies of his work for free, he certainly sees how this can help him "compete" with free:

This is a crucial decision for me. For years I have been advocating that free content is not a threat to the book business. In lowering the price of a book and equaling it to the price of a song in iTunes, the reader will be encouraged to pay for it, instead of downloading it for free.

[....]

It is my (open) secret wish that pricing for ebooks will follow this trend.

I think many folks would agree. It will certainly be interesting to see how well this does, though it's (unfortunately) probably unlikely that Harper Collins will ever reveal the results of its experiment. Hopefully it realizes that many buyers are invested in the experiment as well and it's willing to share the results. Alternatively, if Coelho really wants to get others to follow this trend, if any data he has would be useful to getting that message across, perhaps he'll publish it himself (or, hell, send it to us to publish!)

from the reason-to-buy dept

When I wrote about the failings of JK Rowling's Pottermore ebook store, reaction was mixed. Most sources were praising Pottermore for striking out and demonstrating a new model for publishing, but I wanted to forget the business side for a moment and ask whether the customers were truly receiving any benefit. To add some contrast to this discussion, we can compare it to Discover a New Love, a new romance ebook club launched by independent publisher Sourcebooks (found Through PaidContent). It isn't a direct analog to Pottermore but demonstrates the reason to buy that Rowling's store mostly lacks. For ten bucks a monthper six months, members get one free romance ebook monthly, discounts on other ebooks, and a whole bunch of extras:

The initiative also aims to build community: Sourcebooks will hold parties for members at the major romance conferences, and is also offering

Special “Romance Insider” events for you to help events shape the future of romance publishing including focus groups, panel discussions, surveys and more.

A forum for discussing your favorite authors, books, heroes, heroines, and sex scenes with other members of the community

Member-only content from about our authors and upcoming titles.

Access to member-only special offers, contests, and give-aways

That's how you entice fans: by connecting with them, building a community, and offering that community things that they can't get anywhere else. Now, obviously there are some key differences between this and Pottermore. The Sourcebooks titles will still be directly available through other channels like the Kindle store, and the book-a-month model doesn't really work for a finished series like Harry Potter. But the parallels are striking too: both romance novels and Potteresque megafranchises represent bright spots in the publishing industry, and their escapist nature breeds ravenous fanbases. A Harry Potter book club that offered meaningful perks would certainly be a breakaway hit (of course, as expected because of the extreme popularity of the franchise, Pottermore is still doing pretty well). Apparently the broader Pottermore website (still in beta, promised for early this month) will provide some community-focused incentives, and hopefully that will turn the store into something more relevant to readers—but for now, Discover a New Love provides a good example of how to reward your customers with a true reason to buy.

from the moving-with-the-times dept

Publishers find themselves confronted by a difficult dilemma at the moment. On the one hand, they might want e-books to succeed, because digital devices represent a huge new market to which they can sell their back catalogs. On the other, they might want them to fail, because e-books will cannibalize sales of traditional books, and it's not yet clear how low the price of e-books will have to go in order to avoid the kind of piracy problems the recording industry exacerbated through persistent overcharging.

But maybe publishers can have it both ways – selling high-volume, low-price e-books, and small-run, high-price physical books. As a recent feature in the Guardian devoted to the rebirth of "beautiful books" put it:

What the rise of electronic publishing has done, rather, is create a context in which the book's two distinct incarnations – as beautiful object and as a set of vaporous pixels - are linked not by "or" but "and".

This is certainly what they believe at the Folio Society. You might think that a company that has dedicated itself since 1947 to publishing exquisite editions of classic texts – everything from Beowulf to Elizabeth David's Italian Food – would be feeling glum about its chances in this new landscape. But David Hayden, the publishing director and a bookselling veteran, is feeling perky. An unabashed fan of new technology, he reckons the result of the seismic shifts in publishing will mean "fewer and better-produced books". In particular he believes in the model of the "retroactive purchase", which goes something like this. You buy an e-reader and, at a stroke, have access to thousands of out-of-print classics via Project Gutenberg. One evening, at a loose end, you download The Mill on the Floss, having always wondered vaguely what it was about. You find yourself transfixed. You love this book, you really do, and want to suggest it to your book group. So you buy the Penguin Classic edition, because it's easy to scribble on and pass around. And then, when your Mum's birthday comes around – she loves George Eliot and has been on at you for ages to take the plunge – you give her a handsome presentation copy of the book, bound in buckram and silk, the sort of thing that the Folio Society does surpassingly well.

The rise of beautiful books described in the article is a classic example of using abundance to make money from scarcity. Freely-available e-books encourage people to read a text they might not have encountered otherwise. When they discover they enjoy it, they decide to buy it in a form that enhances the pleasure of reading – a high-quality physical book.

This phenomenon is why publishers should not see low e-book prices – which are likely to come, whether they want it or not, not least because of Amazon's growing power – as the end of the world. In the digital age, where raw information can and will be copied freely, it no longer makes sense to pursue a business model based largely on selling what's inside the book. Instead, publishers should think about the unique elements of the content's packaging, which can't be shared in this way. That's exactly what companies built around open source have done, and Red Hat is now a billion-dollar business.

from the catch-up-with-the-times dept

A few folks have sent over this great interview with Mark Cuban discussing the fact that he has a best selling book on his hands, one that was put together quickly, mostly from old blog posts, sold as a $2.99 ebook online, with Mark handling most of the promotion himself. There are a bunch of things in the interview, but what comes across loud and clear is just how obsolete the old way of publishing is these days. In an era where it still takes years for books to come out, and almost a year between an author handing in their final version and publication, Cuban tells a very different story:

Of all your business ventures, the profit margin for this book is unmatched. Much of the book already had appeared as blog posts, and the production, promotion and distribution costs were negligible ...

Yes. That is what made this approach so appealing. I didn't have to spend a ton of time writing and editing, and Scott Waxman at Diversion Books was very accommodating in allowing me to make edits, literally up to hours before the book was released.

More importantly, I didn't have to commit to doing a book tour and a rigorous interview schedule because I controlled all the economics. I try to always be a good business partner. If a publisher had made a big investment in me, I would have felt immensely obligated to make sure they made money.

Instead, I can work to my schedule and work almost exclusively from my phone and laptop to do all the promotional work.

Before anyone says anything, we're certainly not saying that just anyone can do what Mark did. Given his fame, success, reputation and following, all of that played into the level of success here. And he's willing to admit that. But that doesn't mean that there aren't key lessons here for the publishing industry. The idea of being able to produce smaller books, much more quickly is really quite appealing. And the legacy publishers still just aren't getting it.

from the surely-worth-trying dept

Increasingly, publishers are joining the music and film industries in bemoaning the effects of piracy on the sales of digital products – and some are even starting to sue people for alleged copyright infringement (because that has worked so well elsewhere.) Perhaps they should take a look at what is happening in China: instead of whining about e-book sales "lost" to piracy, publishers there have come up with a business model that embraces the possibilities of the Internet:

Here in China, nearly 195 million people are hooked on a kind of literature that is virtually unknown in the West, but that is rapidly transforming its authors and a new breed of online media companies into the publishing stars of the future. Web literature or “original fiction” as it’s called in China is a new form of serial literature which theoretically allows anyone to become a best-selling author.

The system works through a growing number of self-publishing websites that host thousands of constantly evolving, free-to-read stories posted on the sites by their authors. These websites are incredibly popular with consumers, attracting over 40% of all China’s internet users every month, who come to read web serials that can be anything from realistic novels to historical epics, comics, sci-fi and fantasy.

The ingenious part of this publishing model comes in when an individual author’s serial gathers a critical mass of readers. At this point the self-publishing site invites the author to become a VIP, and their serial moves to a different section of the site where readers can sample some chapters of their work for free, but have to pay if they want to read the latest installments.

That may just sound like a typical bait-and-switch paywall approach - get them hooked then get them to pay - but there are a couple of things of note here. First, the speed at which new content is added: in a comment to the article quoted above, the publisher Lisa Zhang speaks of how "daily updating of the works on our platforms helps to build a close writer-reader relationship." Secondly, the extremely low paywall charges are designed to minimize any reader's urge to hunt out pirated versions of "VIP" content - prices are "around 2-3 Yuan (about 20p or 30 cents) per 100,000 words" according to the article.

Scale is clearly important here, and one of the big advantages that Chinese publishers have over those operating in most other countries. And that applies to the writing side as well as to the sales. In her comment Zhang writes: "by the end of June 2011, 1.4 million writers have been writing on our platforms. They have created 5.4 million titles."

Still, it's great to see publishers moving on from tired arguments about piracy, and spending their money not on lobbying for new laws to defend old monopolies, but on investments in new business models that have led to a huge upsurge in creativity – and profits. Maybe it's time the US started copying China for a change.

from the leaping-into-the-future dept

Joe Konrath, who we've written about numerous times, and Barry Eisler (who we haven't...), contacted me late last week to pass on the fascinating news that Eisler, who has been a NY Times Best Selling author of a variety of thrillers, has turned down a $500,000 publishing deal from a mainstream publisher, in order to self-publish his next book. That's a lot of money to give up. The link is to a (long, but fascinating) dialog between Konrath and Eisler, discussing the thinking behind passing up that kind of money to go the self-publishing route. The key takeaway: the $500,000 comes with strings (as does any publishing deal), and in this case, Eisler feels he's likely to be better off on his own.

Konrath, of course, has spent a lot of time sharing real world data on why the math works for people to self-publish digitally, pricing the book cheaply, but making much, much higher royalties per book sold. I'm still not convinced this move is right for everyone yet, but if you can handle the key functions that a publisher provides (things like editing, marketing, etc.) it can work out quite well. Publishers used to also be key for distribution, but that's less and less an issue these days, when physical book stores are less and less important, and online/digital is key. But you don't need a publisher for those things. Marketing is still the big issue for many, so this depends on how well you can market yourself, or work with someone else (perhaps the person who used to be your "agent") to market the work. And, of course, it's entirely possible that even if you went with a publisher, they'd do an awful job of marketing your book anyway (happens more times than you'd like to believe).

And, of course, the money in that deal is really an advance, that needs to be earned back. As we've discussed with RIAA accounting, earning that back is a lot more complex than it may sound -- and the gatekeeper (the publisher or the label) gets to reach a level of profits way, way, way before the content creator ever does (if they ever do). This part of Eisler and Konrath's discussion is instructive:

Joe: What was the ultimate basis for your decision? Did it come down to pure dollars and cents?

Barry: Financial considerations were a big part of it, yes. You and I have discussed various models to understand what a publisher's advance represents: a loan, an insurance policy, a bet. On the loan model, the first place I heard the concept articulated was in an extremely ballsy and persuasive blog post by Terrill Lee Lankford.

Joe: I like that analogy. I also believe signing with a big publisher is like signing a life insurance policy, where the payments keep getting larger while the payoff gets smaller as time goes on.

Barry: Yes. Now, of course there are numbers where the loan, the insurance, or the bet would make sense. If the loan is so big that you don't think you'd ever be able to make that much on your own, plus you won't have to pay it back, then sure, take it. If the insurance payout is so big that it eclipses the event it's supposed to protect against, okay. And if you find a publisher willing to put down so much money upfront that you feel they must be stoned because no one could ever earn that much back, then by all means, take the bet.

But short of that, you have to wonder if the person you're betting against isn't yourself.

Anyway, yes, much of this was financial. A lot of people don't realize--and I probably wouldn't have realized myself if you hadn't pointed it out--that the appropriate measure for determining how much your books can earn you in digital is forever. In paper, with rare exceptions, there's a big upfront sales push, followed by either total evaporation or by years of low backlist sales. Digital isn't like that.

Joe: Time is the ultimate long tail. Even with a big wad of money upfront, if something sells forever, the back end is what ultimately counts.

Barry: Right. So if you think you're going to die on Tuesday, for sure take the advance on Monday. If you think you're going to stick around for a while, though, and you have resources to draw on such that you don't need that expensive loan, don't take it. You'll be better off without.

Joe: Or to put it another way, getting half a million bucks and 14.9% royalties, forever, isn't as lucrative as no money up front and 70% royalties, forever.

Barry: Yes. Especially because you first have to earn out the half million at 14.9% per book. That could take a while. After which, as you note, you're still only earning 14.9% rather than 70%. You need to move five times the volume at 14.9%.

Of course, the conversation doesn't just focus on Eisler and his decision to turn down half a million dollars up-front. It talks about the publishing industry as a whole, and how it -- like so many other industries -- is struggling to recognize that it's moving away from being a gatekeeper business, and needs to start becoming an enabler business. Instead, it's trying to hang onto the gatekeeper side of things for as long as possible (again, like some other industries we're familiar with).

Joe: I also love print books. I have 5000 of them. But print is just a delivery system. It gets a story from the writer to the reader. For centuries, publishers controlled this system, because they did the printing, and they were plugged into distribution. But with retailers like Amazon, B&N, and Smashwords, the story can get to the reader in a faster, cheaper way.
And publishers aren't needed.

Do you think publishers are aware of that?

Barry: I think they’re extremely aware of it, but they don't understand what it really means.

Joe: I believe they've gotten their business model mixed-up. They should be connecting readers with the written word. Instead, they're insisting on selling paper.

Barry: Yes. There's a saying about the railroads: they thought they were in the railroad business, when in fact they were in the transportation business. So when the interstate highway system was built and trucking became an alternative, they were hit hard.
Likewise, publishers have naturally conflated the specifics of their business model with the generalities of the industry they're in. As you say, they're not in the business of delivering books by paper--they're in the business of delivering books. And if someone can do the latter faster and cheaper than they can, they're in trouble.

Joe: You say they're aware of it, and some evidence points to that being true. The agency model is an attempt to slow the transition from paper to digital. Windowing titles is another one. So are insanely high ebook prices.

Barry: All signs that publishers are aware of the potential for digital disintermediation, but that they don't understand what it really means.

Joe: Because they still believe they're essential to the process.

Barry: I would phrase it a little differently. They recognize they're becoming non-essential, and are trying to keep themselves essential--but are going about it in the wrong way.

Joe: You and I and our peers are essential. We're the writers. We provide the content that is printed and distributed.
For hundreds of years, writers couldn't reach readers without publishers. We needed them.

Now, suddenly, we don't. But publishers don't seem to be taking this Very Important Fact into account.

Barry: Well, again, I think they're taking it into account, but they're drawing the wrong conclusions. The wrong conclusion is: I'm in the paper business, paper keeps me essential, therefore I must do all I can to retard the transition from paper to digital. The right conclusion would be: digital offers huge cost, time-to-market, and other advantages over paper. How can I leverage those advantages to make my business even stronger?

Now, I know we have some publishing folks among the readership here, and I'm sure they'll disagree, but there's clearly some truth to this. And, in fact, there may be many individuals within the various publishing companies who do get this. But institutionally, they seem to be reacting to try to hold back the tide, rather than embrace the tide. This is a pretty standard reaction, and we've seen it in other industries before. One typical response that we hear when pointing this out is that these publishers don't want to make that "leap" to really embrace the new until they know that it's sustainable and that it can work. But the key lesson that we've learned over and over and over again in other industries is that if you wait for such things, it's too late. In ceding that leadership position, you give up on being the enabler, and what's left for you is often... not much.